Charlemagne

Europe à l’Hollandaise

François Hollande’s flawed vision for Europe

LEADERS keep talking about the future of Europe, yet none seems able to offer a clear vision. Angela Merkel speaks vaguely of the need for greater “Europeanisation of national powers”. David Cameron, by contrast, wants a renationalisation of European powers—though without being too specific. This week it was François Hollande’s turn to speak about destiny. His concept, as set out in a speech to the European Parliament on February 5th, is to extend French dirigiste and socialist ideas to Europe, even where they cannot be applied to France itself.

Take the rising value of the euro. France cannot resort to devaluation to close its already large trade deficit. So Mr Hollande wants euro-zone governments to act together to bring down the exchange rate. Or take competitiveness. Mr Hollande has adopted some cautious labour-market reforms, but now he proposes a euro-zone minimum wage. Or take taxation. Having put up French taxes, he wants euro-zone countries to “harmonise” tax policies. Or take macroeconomic policy. If deficit countries must undergo austerity, then the EU as a whole should continue spending to support growth, and surplus countries should boost domestic demand to bring up the rest.

All this, said Mr Hollande, has to be part of a future “euro-zone government”—a subtly different term from the “economic government” that his predecessor, Nicolas Sarkozy, used to advocate. The precise meaning is elusive, though Mr Hollande would like it to include a separate budget for the euro zone.

Some of what Mr Hollande says makes sense. Austerity has been pushed too hard and too fast. And a currency union needs some collective means of counterbalancing downturns in one or other state. Yet for Mr Hollande, as for many of his predecessors, competition is often “disloyal” and market forces dangerous—things to be tamed rather than encouraged. From both the left and the right, French politicians accuse European countries that allow lower wages and tax rates than France of practising “social dumping”.

Nebulous as Mr Hollande’s message may have been, it is striking that he spoke about the future at all. Since his election last year, the Europhile Mr Hollande has acted as if the less said about big European ideas the better. The European summit in December killed plans for a long-term “road map” to redesign the euro zone. In part, Europe’s leaders are busy managing the immediate crisis, still grappling with the creation of a euro-zone banking supervisor. In part, Mr Hollande had an unspoken truce with the German chancellor: he toned down his calls for Eurobonds; she stopped talking so much about the need for political union.

And yet, during his address in Strasbourg, Mr Hollande himself declared that Europe now needed “a stronger political union, otherwise it would be semi-paralysed”. France stood ready “to launch the great project of deepening the economic and monetary union”. Next year’s election for the European Parliament should be the occasion for a “great debate on the future of Europe”, particularly its institutional “architecture”.

At no point did Mr Hollande mention a revision of the treaties, let alone a referendum to approve the outcome. But he seems to be preparing the ground for such a negotiation. Others reckon his conditions are designed to avoid one. At the very least, Mr Hollande is marking himself apart from Mrs Merkel and Mr Cameron, and telling them that if they insist on reopening the treaties, France will brandish a list of difficult demands.

The future of the euro zone, Mr Hollande suggests, will not be the Germanic notion of euro-zone members bearing individual responsibility for their economic policies, within rigid rules imposed by the centre. Instead integration must include common projects on, say, infrastructure and renewable energy, paid for by “new financial instruments”. And integration must be accompanied by greater “solidarity”, including guaranteed jobs and training for young people and, yes, Eurobonds.

Little of this fits with the British model of a looser, highly liberalised common market, in which members have the flexibility to tailor the terms of their membership. Europe, said Mr Hollande, was not just a market or a currency, but a political project where one could not ceaselessly “question everything at every stage”.

There could be no “à la carte” Europe. But there could be a “differentiated” EU in which some countries push towards integration, while preserving a “substantial foundation which must remain common competences”. In other words, Britain need never join the single currency, but cannot undo the deals that created today’s single market.

The 3% question

For now, Mr Hollande’s main worry is not to be cast as a “Club Med” country unable to keep up with Germany in a hard-currency, low-inflation zone. He may soon face a tricky problem. The European Commission’s official forecasts later this month will almost certainly indicate that France will miss its EU target to bring the budget deficit to below 3% of GDP this year. Others, such as the Netherlands and Belgium, may have similar trouble,

Should Mr Hollande cut spending to meet EU rules, or breach the target to avoid what he calls “austerity without end”? The commission, for its part, is torn about whether to dare tell a big founding member like France to tighten its belt. Perhaps, think some, France could be deemed to be meeting its target in “structural” terms (ie, after the effect of the economic cycle is accounted for). Or perhaps, Mr Hollande hinted, the targets could be revised “collectively”. Whatever the fudge they will come up with, Mr Hollande knows that in negotiations about the future of Europe putting public finances in order is the vital condition for maintaining France’s credibility.